Headway Capital

Hello all,

I work there within the investment team, so I can try to give my perspective on the firm. There’s been quite some change over the past few years, which make the previous comments obsoletes (apart from comments on the fact that people at Headway are nice and sharp buyers, which are still applicable!).

Headway’s investment strategy:

• Types of transactions: Co-investments and single-asset continuation vehicles
• Geographies: Europe and North America
• Industries: Generalist (all the “conventional” industries targeted by PE)
• Company type: Buyout (mostly) and growth

Type of work: There is plenty of info on the internet on what single-asset continuation vehicles are, so I am going to write more about the strategy within co-investments (which is unique and where Headway is pioneer) and discuss the implications in terms of work:

• Within co-investments, Headway mainly invests alongside independent sponsors. Independent sponsors are essentially PE firms that do not have a commingled fund, and therefore instead raise capital once they have secured a deal. Headway provides the equity capital to independent sponsors for these deals, or in order words "co-invest" alongside them (because the independent sponsor will always be required to provide personally at least some capital from their own pocket in order to ensure alignment, Headway's money is technically a co-investment)
• Once the deal is done, Headway typically does not seek to intervene in the day-to-day activities of the portfolio company but instead leaves the control to the independent sponsor
• The key “pros” in terms of the work are:
  • The deal flow is stronger than in other shops. Basically, because Headway enters the process once the independent sponsor has secured exclusivity or is close to securing exclusivity (or because the process is often off-auction with a high likelihood of success), the probability of a deal going to closing is very high. Most Associates get 1-4 deals done a year on average
  • Something else that can be considered an advantage is that Associates really focus on the investment appraisal work. Many DD reports as well as the main sponsor’s investment memo are already available when Headway comes in, so the timeline is not as jerky / erratic as it usually is in other processes. The work associated with hiring the buy-side DD providers and managing them is not as heavy. You already have a lot of info (including buy-side and sell-side info) when the deal comes to your desk, and your job really is to (i) see the areas where you think more work needs to be done for Headway IC to get comfort and (ii) get a sense of how good is the deal from a risk-return perspective. Based on the deal team’s views and the initial IC’s questions, the deal team will then investigate the key questions and areas of concerns. A lot of the work is conducted either independently and/or in collaboration with the sponsor. For example, in terms of independent work, Headway is very focused on buying at a significant discount to peers’ valuation multiples, so Associates will often run detailed valuation work to come up with a strong and defensible opinion on valuation. Although the model is provided by the sponsor, Associates are all able to build models from scratch themselves and will create their own view on an operating case to present to IC. That an initial model is provided can be viewed as an advantage in that you are not doing any of the low-value added nitty-gritty work, but instead you are focusing on thinking critically about the key assumptions and what makes a reasonable case
  • You see a lot of deals / IC memos and models produced by the market, so that’s quite interesting to develop a sense of what makes a quality deal and investment professional. People at a buyout firm will work pretty much with the same 10-20 investment professionals of their firm, people at Headway get exposure to literally hundreds of sponsors
  • The timeline during deals is often pretty flexible as (i) Headway typically focuses on transactions with a particularly attractive valuation, which are outside of structured auction processes and (ii) although Headway always tries best to accommodate the independent sponsor, they are ultimately the provider of the equity (and in most cases the lead), so they somehow dictate a little bit the process
  • The key “cons” in terms of the work is that if you are more interested in the portfolio monitoring / value creation within the portfolio company aspects of the job (rather than the deal making / investment appraisal part of it), then Headway is not the best place to be
  • Regarding what was said on the hairy nature of the assets acquired, I would disagree. What’s hairy could be the selling situation rather than the businesses being acquired. The firm is focused on making value investments, so selling situations are not your straightforward structured broad auction. It could be as simple as the fact that the independent sponsor Headway is partnering with on a deal has a particular angle (e.g. knows Management or the sellers very well), or it could be that the independent sponsor sourced the deal after a failed auction process. I personally think these stories make deals more interesting, they certainly contribute to outperformance vs other PE firms

Compensation: The firm updated their compensation policy recently and is currently in the top quartile of total comp in PE in London for its fund size (€500m+), so here the previous posts about compensation are definitely obsolete. The firm reviewed comp as it shifted strategy, and has managed so far to hire and keep very smart people

Atmosphere: The team puts a lot of emphasis on recruiting the right people. They are very selective and will interview until they find someone that is nice, high-calibre and fits in with the culture. Great camaraderie within the pool of juniors. No back-stabbing Associates / Senior Associates - people help each other and I believe are genuinely nice. People can sometimes be very focused on getting things done when an IC is coming but there is a great atmosphere on the floor, people (including Partners / Managing Partners) will always enjoy having a good laugh and don’t take themselves too seriously

Work-life balance: 9am to 7pm/8pm max for Associates; can be less or a little bit more very occasionally in the very middle of a deal with a tight timeline. Weekend work is super rare as well. This is possible in virtue of the fact that the team is super efficient. The team spends as little time as possible on deals that it knows will not make it through IC, and has optimized and standardized its investment process (e.g. team has great templates to perform the recurrent analysis efficiently, has invested in Hebbia subscriptions, has great laptops). Also, no useless pages or analysis are produced – Partners and mid-levels won’t be asking for painful and low value-added comments on your IC papers. Seniors are super respectful of people’s time outside office-hours. The team will literally remind you to take holidays when you have days off that you have carried over from the previous year (so that your days off don’t expire before you are able to take them)